Power imbalance between working people and employers must be addressed

Posted By TEU on Nov 10, 2017 | 1 comment

Dr. Stephen Blumenfeld, Director of the Centre for Labour Employment and Work at the Victoria University of Wellington, outlines why the new government needs to move quickly to restore the rights of working people.

Since the 1970s, market liberalisation and technological change have resulted in a decline in the number of manufacturing and blue-collar jobs, which had buttressed New Zealand’s economy since the 19th century. These were, for the most part, union jobs that empowered workers, paid good wages, ensured safe workplaces and offered retirement security.

As those jobs all but disappeared in the 1980s and 90s, due in large measure to the opening of the country’s economy to promote international competitiveness and to the rapid globalisation which followed, successive governments gradually stripped away workers’ statutory rights along with the institutional and legislative support for unions.

Through lower-cost imports, outsourcing and shifting production overseas, the opening of New Zealand’s economy during the 1970s and 80s substantially reduced employee bargaining power. This was followed by radical deregulation of the country’s labour market through enactment of the Employment Contracts Act in 1991, which ended compulsory membership provisions and shifted collective bargaining to the enterprise level.

Together, these shifts contributed to a precipitous decline in union density and collective bargaining coverage, a loss of employment protection, and a concomitant shift in the balance of power towards employers. Moreover, notwithstanding the Employment Relations Act 2000, both union density and collective bargaining coverage in New Zealand currently sit at their lowest levels since the 1930s and near the bottom of the Organisation for Economic Co-operation and Development (OECD).

In addition, labour productivity growth and wage growth began to diverge in the 1970s, with the labour share of income falling from around 60 percent in the early 1980s to 46 percent in 2002, reflecting a loss to wage earners of around a quarter of aggregate income.

That decline, in particular that was experienced during the 1990s, was far more a consequence of within-industry effects – specifically, the significant fall in workers’ relative bargaining power and the loss of employment protection – than of shifting industrial structure.

Furthermore, while the labour share of income increased slightly between 2002 and 2009, there is no sign of it returning to its pre-1980s level. Crucially, no viable and sustainable alternative collective voice mechanism with which to counterbalance that shift has emerged in that time.

As has proven to be the case in other OECD countries, in order to restore the balance of power in employment relations, government must act to protect and promote union membership and collective bargaining.

In that regard, the newly established New Zealand government should scrap the 90-day trial period, which has the effect of hindering newly hired employees from joining unions, and reintroduce the ‘30-day rule’ for new employees, enabling them to freely choose whether or not to join a union.

It is also important that the ‘duty to conclude’ a collective agreement be reinstated in the legislation to ensure employers don’t simply walk away from bargaining. Finally, the government should reaffirm the importance of free association and the role of unions by enforcing regulations around employers ‘passing on’ terms and conditions of a collective agreement and enforce bargaining fees where employers offer union-negotiated pay or conditions to their non-union employees.